Mark Leavy wrote: ↑Mon Apr 06, 2020 6:19 pm
ahhrunforthehills wrote: ↑Mon Apr 06, 2020 4:58 pm
So for taxable, the best rules to play by are pretty much:
1. Re-balance at 15/35
2. ALWAYS being on the lookout for anything that can be tax-loss harvested for a loss. Swap the asset for a similar (but not too similar) asset and pocket the tax deduction.
3. Never auto-reinvest dividends. All interest/dividends should go to lagging assets to lower the chance of a re-balancing event.
4. New money should always go to lagging assets.
5. If you sell anything for a gain, do everything you can to sell a lot that was purchased over a year ago to avoid short-term capital gains.
Sound about right?
Looks solid.
Okay, so if you are investing in a fully taxable account, we came to the conclusion that you should rebalance everything back to 25/25/25/25 after hitting a 35% band.
But now I am wondering if this is sound logic after watching this video:
https://www.youtube.com/watch?v=MhszdAX9Leg
Wouldn't we be much better off just bumping that 35% asset down to 34% or 33%. Afterall, if the name of the game is to "trigger a taxable event as a last resort", going all the way from 35% to 25% is the nuclear option tax-wise.
To take it even further, the guy has me wondering if a 65% stock and 35% Gold allocation is a much better option than a PP for a person in taxable accounts.
He discusses here how bonds being added reduced risk by only a very little bit:
https://www.youtube.com/watch?v=LA2Yr6NoZyA (around 5:05).
However, those bonds are taxed as ordinary income, which destroys performance overall.
Meanwhile stocks not only qualify for capital gains, but can also receive a step-up basis if you die holding them for your kids.
Since you are no longer holding all of those fixed-income treasuries, you now have less taxable income. This in turn further reduces your tax rate that you would owe on Gold sales as reflected in this video:
https://www.youtube.com/watch?v=_aZqiP4gtZQ
Meanwhile, if compare a 65%/35% Stock/Gold to a Vanilla PP at Portfoliocharts, it appears that the 65%/35% outperforms in terms of Withdrawal Rates in both a US and Japan environment. Everything seemed pretty good in the Simba Spreadsheet as well.
In summary, it seems like if someone is in taxable investment accounts, a 65%/35% stock/gold allocation is superior to a standard PP.
Is there more volatility? Sure. Investments CAN go up. Investments CAN go down. But taxes on those treasuries are basically GUARANTEED to occur.
Has anybody kicked the tires on a strictly stock/gold allocation?